A working paper published by the European Central Bank looks at the extent to which trade costs can limit the pass-through of lower costs achieved by internal devaluations to export prices.

In Internal devaluation in currency unions: the role of trade costs and taxes, Filippos Petroulakis considers what he terms the “hitherto ignored role” played by trade costs and taxes in internal devaluations. These factors played a significant role during the recent crisis in peripheral countries in the